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With Warning, Obama Presses China on Currency

President Barack Obama spoke at the United Nations General Assembly on Thursday in New York.Credit
Doug Mills/The New York Times

UNITED NATIONS — President Obama increased pressure on China to immediately revalue its currency on Thursday, devoting most of a two-hour meeting with China’s prime minister to the issue and sending the message, according to one of his top aides, that if “the Chinese don’t take actions, we have other means of protecting U.S. interests.”

The unusual focus on this single issue at such a high level was clearly an effort by the White House to make the case that Mr. Obama was putting American jobs and competitiveness at the top of the agenda in a relationship that has endured strains in recent weeks on everything from territorial disputes to sanctions against Iran and North Korea.

Democrats in Congress are threatening to pass legislation before the midterm elections that would slap huge tariffs on Chinese goods to undermine the advantages Beijing has enjoyed from a currency, the renminbi, that experts say is artificially weakened by 20 to 25 percent.

Mr. Obama’s aides said he was embracing the threat of tariffs and new trade actions against China at the World Trade Organization to gain some leverage over the Chinese, but was also trying to head off any action that would lead to a destructive trade war.

Jeffrey Bader, the senior director for Asia at the National Security Council, told reporters that the two men engaged in “a lengthy discussion about the impact and the politics of the issue.” One Chinese official speculated Thursday that Mr. Obama’s insistence on spending so much time on the issue was motivated by pre-election politics, suggesting that the pressure might abate after early November.

While the United States has been pressing China for years to lift the strict controls on its currency, which keep Chinese exports competitive and more factory workers employed, American voters and lawmakers have only recently seized on exchange rates as a potent political issue. Mr. Obama pressed much harder on Thursday than during a visit to Beijing last year, perhaps because a Chinese commitment several months ago to allow the value of the currency to rise has resulted in a change of less than 2 percent.

The meeting with Mr. Wen came as the United States appeared to lean toward its longtime ally, Japan, in an increasingly heated standoff between China and Japan over who has claim on territory in the East China Sea.

In Washington, Defense Secretary Robert M. Gates said that China and Japan should sort out the issue themselves, but that “We would fulfill our alliance responsibilities,” a term that clearly referred to the American military alliance with Japan.

But the United States also tried not to inflame the dispute. It barely came up at the meeting between Mr. Obama and Mr. Wen, Mr. Bader said, adding that despite the talk of America’s obligation to back its military ally, “we have no expectation in any known universe that this would escalate to that kind of a level.”

Mr. Obama’s meeting with Mr. Wen, in a spare conference room usually used by members of the Security Council, came minutes after the president told the United NationsGeneral Assembly that his efforts to engage friends and adversaries were beginning to bear fruit.

He called on Arab states to support fragile Middle East peace talks and warned Iran that it would face sustained international pressure if it did not negotiate seriously over its nuclear program.

Iranian officials have hinted they are prepared to resume talks, without setting a date.

“The door remains open to diplomacy should Iran choose to walk through it,” said Mr. Obama, who plans to address the Iranian people directly on Friday in an interview with BBC’s Persian service. “But the Iranian government must demonstrate a clear and credible commitment, and confirm to the world the peaceful intent of its nuclear program.”

If Iran fails to meet its obligations under international nonproliferation treaties, he added, it “must be held accountable.”

In June, the United Nations Security Council imposed its fourth round of sanctions against Iran, which were followed by harsher measures by the United States and European and Asian nations. On Wednesday, Russia made clear that it would not be fulfilling a contract to sell Iran an advanced missile system.

Mr. Obama also called on Israel to extend its partial freeze on building new Jewish settlements in the West Bank, construction that is one of the most contentious issues between Israelis and Palestinians.

The moratorium is set to expire this weekend, and hard-won talks could be stymied if the Israelis fail to extend it and the Palestinians decide to walk away from the table.

“Our position on this issue is well known,” Mr. Obama said. “We believe that the moratorium should be extended. We also believe that talks should press on until completed.”

Clashes on Wednesday between Israeli security forces and Palestinians in the Old City of Jerusalem underscored the fragile state of affairs in the region and the potential for violent outbursts if the negotiations fall apart.

Mr. Obama acknowledged the possibility of “terror, or turbulence, or posturing or petty politics” to disrupt the negotiations, but exhorted world leaders to stand behind the peace process.

“When we come back here next year, we can have an agreement that will lead to a new member of the United Nations, an independent state of Palestine, living in peace with Israel,” he said.

Tonally, Mr. Obama’s speech to the General Assembly was dramatically different from the one he delivered last year, in his maiden appearance as a new president promising change not only at home, but in America’s dealings with the rest of the world. If the 2009 speech was about the promise of a new approach, and often interrupted by applause, this speech was far more about pressing countries to take up what he called their “responsibilities.”

“Last year he sought to signal that U.S. foreign policy was under new management and intended to work better with others, just what his audience wanted to hear,” James M. Lindsay, the director of studies at the Council on Foreign Relations, wrote shortly after the speech was over. “This year he made clear he wants to get things done, and that will require others to do things they would prefer not to do.” He added, “He shouldn’t be surprised to discover that others are slow to follow.”

Mr. Obama, at turns sweeping and philosophical, told the delegates and world leaders that it was “our destiny” to endure a time of recession, war and conflict, and spoke out broadly in support of open governments and human rights.

Correction: September 29, 2010

An article on Friday about strains in the relationship between the United States and China misidentified the location of islands in a heated territorial dispute between China and Japan that carries the risk of further complicating problems between the United States and China because the United States appears to favor Japan. The islands are in the East China Sea, not “near the South China Sea.”

A version of this article appears in print on September 24, 2010, on page A1 of the New York edition with the headline: Obama Presses China to Let Currency Rise. Order Reprints|Today's Paper|Subscribe